Markets Look to Data and Fed Rhetoric for Direction

From an editorial perspective, today’s trading tone will be shaped by macroeconomic data and Federal Reserve rhetoric. Investors remain cautious near record highs, with attention firmly centred on consumer demand signals and inflation dynamics.

Retail sales in focus

The key macro release today is U.S. retail sales for December. Consensus expectations point to a 0.4% month-on-month increase, following a 0.6% gain in November.

Our baseline scenario assumes a slightly stronger outcome, with headline retail sales rising by 0.5%, sales excluding autos increasing by 0.3%, and the control group advancing by 0.4%.

An upside surprise would reinforce confidence in a soft-landing scenario, supporting cyclical sectors and small-cap equities. Conversely, weaker data could revive concerns around demand momentum.

Fed rhetoric under the spotlight

Markets will also be closely watching remarks from the President of the Dallas Fed and FOMC member Lorie Logan.

Investors are looking for her assessment of inflation trends and their implications for economic growth. A constructive tone could strengthen expectations for a more active easing cycle later this year.

Market tone and technical backdrop

The overall risk balance remains moderately positive, with volatility contained.

From a technical perspective, the S&P 500 continues to hold above its 50-day moving average near 6,890, which remains a key support level confirming the prevailing uptrend.

S&P 500 and Nasdaq futures are consolidating, with markets awaiting confirmation from today’s data.

Previous session recap

In the prior session, U.S. equity indices finished higher. The S&P 500 closed near 6,960, approaching its all-time high, while the Nasdaq held above the 25,000 level, maintaining its position below a local descending trendline.

What to watch today

Futures on the S&P 500 and Nasdaq are trading in a consolidation range. For the uptrend to remain intact, indices need to hold above 6,900 on the S&P 500 and 25,000 on the Nasdaq.

Key resistance levels remain near the 7,000 zone on the S&P 500 and around 25,500 on the Nasdaq.

Market drivers

• U.S. retail sales data for December
• Renewed strength in large-cap technology stocks
• Expectations for higher IPO activity in the U.S., with issuance potentially reaching $160 billion
• Ongoing Q4 earnings season, with over 59% of S&P 500 companies reporting EPS growth of 13% year-on-year
• Investor focus on upcoming labour market and inflation data

Sector performance

Cyclical sectors showed mixed performance, with Materials and Energy among the leaders, while Retail and Financials lagged.

Growth-oriented sectors posted broadly positive gains, led by IPO-related, cloud and solar themes. Biotechnology ended the session slightly lower.

Defensive sectors mostly underperformed, with Healthcare leading declines, while Utilities managed modest gains.

Cross-asset overview

Oil continues to trade within a local upward channel, testing resistance near 64.5.

U.S. Treasury yields remain within a broader medium-term uptrend, attempting to stabilise below 4.2%.

The VIX is hovering near the lower boundary of its local rising channel around 17, indicating contained risk appetite.

Gold, having formed a local uptrend following a correction, is testing resistance near the 5,100 level.

Technical analysis by: Lucas Grant, Senior Technical Analyst at Finmire.